Over the weekend, after four contentious days of hearings,
holders of certain senior debt asked to change their votes from
no to yes, Stephen Moeller-Sally, an attorney for the
debtholders’ trustee, Wilmington Trust NA, told U.S. Bankruptcy
Judge Robert Drain at a hearing today in White Plains, New York.

Another group of senior lenders is also nearing acceptance
of the plan, which is backed by Leon Black’s Apollo and seeks to
reduce a $4 billion debt load at the maker of silicone and
quartz products. Drain gave the parties another day to resolve
disputes and said he would reconvene tomorrow to consider
confirming the plan.

Both lender groups, known as the first-lien and 1.5-lien
noteholders, had objected to part of the plan that would deprive
them of a premium for early redemption of their holdings.
Instead, they would recover their investment plus accrued
interest in cash. Momentive has said in an earlier court filing
that the “make-whole” premium would have amounted to more than
$200 million.

By acquiescing, the senior noteholders will get full
payment in cash plus accrued interest, without the make-whole
premium. Had they continued to resist, they would have wound up
with new debt, including the make-whole premium if Drain decided
it was warranted.

‘Standing Around’

Drain let the holdout creditors see where things were
headed last week, when he grew impatient with the wrangling.

“This is a bunch of lawyers standing around avoiding an
obvious solution,” Drain told their lawyers at an Aug. 22
hearing. “You know most people when offered payment in cash
take it.”

The holders “have taken your honor’s statements at the
hearing on Friday and from the proceedings from last week under
advisement and made a good-faith determination to change their
vote and make it consensual,” Moeller-Sally said.

Momentive told the judge today that they want to hear his
ruling on whether he will confirm the plan.

“We offered this up as part of the plan and it was
rejected,” said Matthew Feldman, an attorney for Momentive,
referring to the cash payment. There’s no cause to change their
vote “other than they think they are going to lose,” he said.

Drain stopped the hearing to discuss the vote-switch in his
chambers, before saying he would delay his rulings until
tomorrow.

‘Not Litigating’

The “day is to be spent negotiating, not litigating, not
preparing for some sort of hearing” on the request to change
votes, Drain said.

If the senior lenders and Momentive reach a deal, Drain
still must decide whether to confirm the plan and address an
effort by the noteholder with the lowest payment priority to get
recoveries at the expense of those above them.

The Waterford, New York-based company filed for bankruptcy
protection in April after struggling to meet payments on debt
dating to its $3.8 billion buyout by Apollo in 2006. The
proposed plan would cut debt to as little as $1.3 billion.

Its $250 million of 10 percent notes due 2020 closed at 97
cents on the dollar today after trading as low as 92.9,
according to Trace, the bond-price reporting system of the
Financial Industry Regulatory Authority. The notes traded above
par on Aug. 21.

The debtor’s $1.1 billion of 8.875 percent notes due 2020
dropped to 98.1 cents on the dollar today after trading Aug. 22
at 98.5, according to Trace.

The case is In re Momentive Performance Materials Inc., 14-bk-22503, U.S. Bankruptcy Court, Southern District of New York
(White Plains).